How outsourcing payroll can benefit the business

Aug 29, 2016

Marina Nolte, head of outsourcing at Sage HR & Payroll, points out that the ‘do-it-yourself’ instinct that inspires you as an entrepreneur to start a business can also prevent you from recognising when it’s time to stop trying to do everything yourself.
One aspect of the business that many SME owners manage on their own, when it often makes sense to get help, is the processing of the payroll.
This is a time-consuming administrative function that is operationally important, yet does little to help your business differentiate itself from the competition.
As such, it often makes sense to outsource it to a specialist service provider so you can focus on strategy and customer satisfaction while leaving the paperwork and processing to a third party. In addition, it means you and your HR team can focus on your employee value proposition and employment equity strategy rather than on administrative tasks such as printing and distributing payslips.

How does outsourcing work?
Outsourcing is a contractual agreement where you entrust a third-party service provider with running a service or process on your behalf. The benefit is that you get access to the service provider’s expertise, technology and processes without needing to invest in skills and infrastructure yourself. Thus, outsourcing your payroll process eliminates many of the back-office costs associated with operating your payroll in-house.
You no longer need to worry about whether your payroll solution meets current legislation or bear the cost of upgrading. Your employee costs are reduced and valuable time retraining new team members becomes a thing of the past. Computer terminals on your network are no longer tied up processing your payroll, allowing other work functions to be processed and improving efficiency.
The growing complexity of South African labour law and tax regulations, paired with a tight economy, means that many Small & Medium Businesses see great benefit in outsourcing the management of their payrolls and certain human resources (HR) functions. By working with a specialist, you can be sure that your payroll is accurate and that you are compliant with the latest tax laws and tax calculations. Another benefit is that the payroll outsourcing service provider will have the processes and discipline to better manage the risks of leaking employee information.
Outsourcing can make your payroll run faster and easier. All you need to do is gather and communicate payroll information to the payroll outsourcing service provider. Using a payroll service also gives employers access to a greater number of services. This has become increasingly important, as administration of other functions (for example retirement plans, medical aid schemes, direct deposit and leave administration) has become part of the payroll process.

How can you tell if it is time to outsource payroll?
Answering “yes” to several of the following questions:
• Have your employees had to remind you when it’s time to issue payroll?
• Have your employees questioned your payroll calculations?
• Do you need to free up payroll employees to perform other functions in your company?
• Have you had employee issues due to confidentiality breaches?
• Has your company received a penalty from SARS for failing to pay on time or for paying an incorrect amount?
• Have you ever overpaid SARS or the UIF?
• Do you offer multiple payroll deductions for employee benefits such as medical aids, pension and provident funds?
• Do you experience difficulty in reconciling payroll related payments?
• Are you frequently adding new employees and/or terminating others?
• Are you having difficulty tracking accrued vacation and sick leave balances?
When choosing a payroll outsourcing service provider, it pays to compare not only pricing, but level of service and value added to your business as a whole.